Iran Nuclear Deal Signed, Europe’s Refugee Crisis Peaks, China’s Markets Crash and Cuba-US Relations Are Restored

Jamaica Homes Global Conflict & Caribbean Impact Review | Published 3 October 2015 | Reporting Period: 3 July – 2 October 2015

Quarterly Briefing

• The P5+1 and Iran finalise the Joint Comprehensive Plan of Action on July 14, the most significant nuclear non-proliferation agreement in a generation; Iran agrees to limit enrichment in exchange for sanctions relief.
• Europe’s refugee and migrant crisis reaches its peak: over 500,000 people cross the Mediterranean in 2015; the image of three-year-old Aylan Kurdi’s body on a Turkish beach on September 2 shocks the world.
• China’s stock markets lose over 30 per cent of their value in the summer months; on August 24—“Black Monday”—global equity markets fall sharply on fears of a Chinese hard landing.
• The United States and Cuba restore full diplomatic relations on July 20, reopening embassies after 54 years; the historic normalisation fundamentally changes the Caribbean’s geopolitical landscape.
• Greece votes No in a July 5 referendum on EU bailout terms but its government then accepts a harsher deal on July 13, remaining in the eurozone while implementing severe austerity measures.
• Russia signals it is preparing a military deployment to Syria in support of the Assad government; as of this writing, Russian military personnel and equipment have arrived in Latakia.

Prologue: Diplomacy’s Summer and Humanity’s Crisis

The third quarter of 2015 contained both the decade’s most significant multilateral diplomatic achievement and one of its most haunting images of human failure. The Iran nuclear deal — years in the making, opposed by several regional powers and the Republican majority in the US Congress — was signed on 14 July and represented a genuine exercise of international diplomacy that produced a verifiable, if limited, reduction in nuclear risk. Six weeks later, photographs of Aylan Kurdi’s small body face-down on a Turkish beach told a different story: of hundreds of thousands of people so desperate to escape conflict that they were willing to risk their children’s lives on overcrowded rubber dinghies, while European governments argued about quotas and fences. For Jamaica and the Caribbean, the quarter brought the extraordinary development of US-Cuba normalisation, whose consequences for Caribbean diplomacy, economics and politics were only beginning to unfold, alongside China’s financial volatility which affected the global economy that underpins Caribbean tourism and remittances.

The Iran Nuclear Deal

The Joint Comprehensive Plan of Action, finalised in Vienna on 14 July after years of diplomatic effort led by the Obama administration and the European Union, committed Iran to reducing its uranium enrichment capacity by approximately two-thirds, eliminating its stockpile of medium-enriched uranium, reducing its number of centrifuges, converting its Fordow facility to a research centre and accepting intrusive IAEA inspections. In exchange, the United States, EU and UN would progressively lift sanctions that had severely damaged Iran’s economy. The deal was opposed by Israel, Saudi Arabia and Republican members of the US Congress; the Iranian Revolutionary Guard Corps and hardline clerics opposed it within Iran. The Obama administration mounted an intensive lobbying effort that ultimately secured enough Democratic congressional support to prevent a resolution blocking the deal.

For oil markets, the JCPOA’s implications were significant: Iran, with the world’s fourth-largest proven oil reserves, would eventually re-enter global markets as a major exporter once sanctions were lifted. The timing — estimated at January 2016 if implementation milestones were met — meant an additional 500,000 to one million barrels per day of Iranian crude would join a market already oversupplied. For Caribbean oil importers, the prospect of further downward pressure on oil prices was mixed news: lower fuel costs benefited import bills, but the associated Venezuela crisis threatened PETROCARIBE simultaneously.

Europe’s Refugee Crisis

The European refugee and migrant crisis reached its most acute phase in the summer and early autumn of 2015, as hundreds of thousands of people — predominantly Syrians fleeing the civil war, but also Afghans, Iraqis, Eritreans and others fleeing conflict and persecution — crossed the Mediterranean and Aegean seas on overcrowded and unsafe vessels. Thousands drowned. The photograph of Aylan Kurdi, a three-year-old Syrian boy whose family had fled Kobane, lying face-down on a beach near Bodrum, Turkey, on 2 September generated an unprecedented wave of public emotion across Europe and prompted a temporary political shift toward more welcoming policies in several countries, including Germany under Chancellor Angela Merkel. European governments were deeply divided on burden-sharing, quota systems and border security. Hungary built a razor-wire fence; Germany temporarily suspended the Dublin Regulation to accept Syrian arrivals.

For Caribbean nations, the European refugee crisis was a humanitarian concern of deep moral significance but also a practical reminder that the Syrian conflict’s consequences reached far beyond the Middle East. CARICOM members followed the crisis with attention; several Caribbean nations had their own historical experiences of mass displacement and understood the institutional and social pressures that mass migration could generate in receiving countries.

Cuba-US Normalisation: A Caribbean Transformation

On 20 July 2015, the United States and Cuba reopened their respective embassies in Washington and Havana, ending 54 years of diplomatic estrangement that had been a defining feature of Caribbean and Latin American geopolitics since the 1961 Bay of Pigs invasion. The normalisation process, announced by Presidents Obama and Castro on 17 December 2014, had proceeded through a series of steps: prisoner exchanges, the restoration of banking relationships and the reopening of direct flights. The July 20 embassy reopening was the symbolic centrepiece.

For Jamaica and CARICOM, normalisation was a transformation of the regional diplomatic landscape. The US trade embargo remained in place, requiring congressional action to lift, and Cuba’s internal political system was unchanged. But the end of the ideological confrontation that had structured Caribbean diplomacy for half a century created new possibilities: for US-Caribbean-Cuba triangular economic arrangements, for the removal of CARICOM members’ awkward position of maintaining relations with both Washington and Havana, and for the longer-term integration of Cuba into regional economic frameworks. Jamaica had maintained warm relations with Cuba throughout the estrangement period, and the normalisation offered prospects for new forms of engagement.

China’s Market Turbulence and Greece

Chinese equity markets, which had surged in the first half of 2015 driven by retail investor speculation and margin lending, lost over 30 per cent of their value between June and September. On 24 August — “Black Monday” — the Shanghai Composite fell 8.5 per cent in a single session; global markets fell in response, with the Dow Jones losing 1,000 points at the open. The Chinese government intervened with extraordinary force, suspending IPOs, restricting short selling, and directing state entities to buy shares. The episode raised serious questions about the credibility of Chinese economic management and the pace of the underlying economic slowdown. For the Caribbean, which had benefited substantially from Chinese tourism growth, infrastructure investment and trade over the previous decade, any significant Chinese slowdown was a matter of direct economic concern.

Looking Ahead

Russia’s military deployment to Syria, which was still developing as this edition went to press, represents the most significant external intervention in the Syrian conflict since the US-led coalition began airstrikes in September 2014. Its full implications for the war’s trajectory, for US-Russia relations and for regional stability are not yet clear. Iran’s nuclear deal sanctions relief will begin adding oil supply to an already oversupplied market. Europe’s refugee crisis shows no sign of abating as the Syrian conflict produces no resolution. Cuba’s normalisation with the US will continue to develop. And the global economy faces a period of heightened uncertainty following China’s summer turbulence. Jamaica enters the final quarter of 2015 with its IMF programme continuing and its fiscal position gradually improving — but surrounded by a world whose turbulence is not diminishing.

Jamaica Homes Global Conflict & Caribbean Impact Review is published quarterly, examining how wars, geopolitical tensions and major international crises have shaped Jamaica, the Caribbean and their economies.

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